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I need some help with this cash budget, PLEASE! I am confused on exactally what to do and how to do it. If someone could help me out, it would be greatly appreciated! Sales: Dec $2,800,000 Jan $4,000,000 Feb $5,600,000 Mar $4,200,000 Apr $3,500,000 The overhead is: Dec $320,000 Jan $325,000 Feb $335,000 Mar $335,000 Apr $340,000 Selling and General Expenses: Dec $625,000 Jan $637,000 Feb $642,000 Mar $655,000 Apr $650,000 25 percent of sales are collected during the month of the sale 75 percent are collected in the month following the sale. Material purchases are 30 percent of the next month's estimated sales and payments lag purchases by one month. Labor costs are 35 percent of next month's sales and are paid during the month incurred. Factory overhead and SG&A expenses are paid during the month they are incurred. The company has purchased a new piece of equipment for $600,000 and is planning to pay for the equipment in February. Tax payment of $750,000 to the IRS is due in January Dividend payment of $400,000 is due in March. The company's projected cash balance at the beginning of January is $1.25 million. The company wants to maintain a minimum cash balance of $750,000 as of the end of each month. As part of the cash budget, determine how much money the company needs to borrow each month or if they will have excess cash to begin repaying their loan. I don't even know where to start and I a horrible with this type of stuff. Could someone please help me out?
I'll try to get you going. I highly recommend doing this problem in Excel, it makes the problem a lot easier to do and figure out. Start by labeling the months on top going horizontally, the income and expenses will be vertical. Then plug in what you know. So you should set your spreadsheet up as follows: ..................Dec Jan Feb Mar Apr Total Sales 2,800,000 4,000,000 5,600,000 Collected (first mo) Collected (2nd mo) Total Collected Materials Pur. Materials Paid Labor Costs Overhead 320,000 325,000 335,000 S & Washington Expenses 625,000 637,000 642,000 Equipment Pur 0 0 600,000 Tax Payment 0 750,000 0 Div. Payment 0 0 0 400,000 So now just go through and read about the collection procedures on sales, material purchase payments and payments for labor. Just so you can check your answers, I came up with a cash balance of $3,060,000 at the end of April (assuming no loans had been repaid) and the total loan amount taken of all the months combined as $4,269,000. Once you figure out how to do these types of problems they are a snap the next time you see them. Good luck to you, hope this helps.
Hello. First you have to determine which method of accounting you are using. ACCRUAL If you have an inventory to contend with. CASH Accounting if you don't deal with an inventory. If you deal with manufacturing a product and have an inventory, you have to declare what the COST OF GOODS, the cost of manufacturing the item. The COST OF GOODS Washington COG, is an expense and is taken off the INCOME each month. Don't forget you can't deduct those same expenses in the EXPENSES section. * If you're using the ACCRUAL method you must account for the money coming in each month, even thoughh most of it comes in the next month. This is a simple explanation of a complex problem. You really should enroll in an on-line bookkeeping program to view the different spreadsheets and how it looks. Once you understand the basic concepts, constructing a spread sheet will be easy. The advantages of using a simplified method instead of a program like Quickbooks will soon become apparent. I don't currently offer an online bookkeeping program, but do offer bookkeeping as it's my business. You may email me at: email@example.com. Humbe Harv
You don't need help you are just too lazy to figure this out yourself.